Marketplaces for B2B Manufacturers as Fast Lane to D2C Without Compromising Resellers

You can split the challenges that manufacturers currently face into two camps: the pressing need to go D2C, and potential channel conflict.

D2C – vital for success

The vast majority of business for most manufacturers is still being conducted the old school, tortoise way – over dealer networks and established routes from past connections. As industries and the world at large shift towards digitization, these dynamics are changing.

For one thing, customers can now inform themselves online and no longer need to rely on a sales representative to source information. Customers now expect to find the most reliable information and most comprehensive catalogue of products directly on a manufacturer’s website or app. Consider your own buying habits. If you want to purchase a new iPhone, who do you go to for the details? Directly to apple.com, or to your local Best Buy?

“41% of [B2B] buyers say that they would like to buy online but the products they need are not sold through the digital commerce channel.”

 - Gartner, Increase Profits and Delight Buyers by Becoming a Digital-First, Omnichannel B2B Seller

Having a D2C channel is not entirely about the desire to sell directly to the consumer. It’s also about responding to the customer’s need for the most comprehensive product information – selling the products to them directly once they’ve found the information they need simply offers a convenient shortcut for your customer. And, potentially higher margins for your business.

The infrastructure and processes associated with going D2C are important for manufacturers to consider. Most manufacturers do not have the logistics set-up in order to ship single quantities of products directly to a customer. This is where the marketplace model can aid manufacturers in going D2C. Resellers, acting as merchants on the marketplace, have the infrastructure already in place to manage the shipping and end-mile delivery of your direct sale, via the marketplace.

If you as a manufacturer do have the infrastructure to ship directly, then your resellers can take advantage of dropshipping via the marketplace. This means that they can advertise and sell a wider range of products without having the inventory themselves – known as an ‘extended aisle’ – where the manufacturer ships directly to the customer.

Another important factor to consider is marketing. Most manufacturers have historically never needed to invest in marketing, so it’s easy to feel like a fish out of water. Going D2C forces your business to set up brand and product information (often requiring some kind of PIM system).

Since your customers want to come to you directly for the most up-to-date and comprehensive product information, this means a real investment in this side of the business. While the branding side of things might be daunting for many manufacturers, it should be viewed as an opportunity to develop traffic, build relationships with your customers and control your company’s messaging.

The final challenge to consider with D2C is the need for customer service. While previously, all customer service would have been handled by your dealer network, having direct access to your customers also means having to solve their queries and complaints.

The silver lining is that your brand is much more in control – you should view this as an opportunity to develop a world-class customer service experience for your customers. Since B2B is still about nurturing relationships, those businesses who invest properly into their customer experience will be the ones racing across the finish line in the future.

Channel conflict

Your current dealer network and resellers are a hugely important part of your commerce ecosystem, and going D2C won’t change that core fact – but your relationship will evolve. Most dealer networks will be actively opposed to manufacturers going D2C as it can be seen as a way of ‘cutting out the middleman’. This is where the marketplace model comes into play.

By establishing your current dealer network as merchants on your marketplace, you will work more closely together to ensure that you’re not competing with each other and potentially cannibalizing business opportunities. Explain to your dealer network that going D2C is vital for your business in order to stay competitive, and that you are simply opening up one new sales route alongside your existing channels through your dealers and resellers.

As a manufacturer, keeping your dealer network is vital because of the services they provide alongside the products. Most manufacturers don’t have the infrastructure or processes in place to handle return management, support and consulting, testing products in-store, repair services and spare parts, or local pickup like Buy Online Pick Up In-Store (BOPIS).

All of these services are at risk if your relationship with your dealer network is compromised, which is why it’s vital to approach your resellers in a collaborative manner and illustrate how becoming a merchant on your marketplace will benefit their bottom line. Further below we outline some of the specific value propositions for dealers to help you approach your network and communicate the clear benefits for their business.

So we’ve covered the general concept and some of the potential benefits of a D2C marketplace by now, but it can be tricky to see how this model might apply to your own business without tangible examples. Below, we outline a small selection of manufacturers and how the marketplace model would be advantageous to their specific business. These practical use cases should offer inspiration of how a D2C marketplace would benefit your own company.

• Expert services – Bicycle manufacturers: Bike enthusiasts tend to be fastidious customers. They want to go into a store and chat to the clerk, usually a keen cyclist themselves, and feel that they are in the company of people and products that serve their particular needs.
  
  Therefore, resellers are extremely important in the bicycle industry. Normally there will be a network of local brick and mortar stores that offer expertise and services, such as repair. It’s within a manufacturer’s best interest to keep this dealer network, as they help you to retain an already loyal customer base, who without the expertise, might easily slip away to cheaper online options such on Amazon.
  
  In addition, the partner stores also assemble the bikes that manufacturers ship in bulk, readying them for last-mile delivery or pickup. By collaborating with your resellers via a marketplace, you retain all the benefits of their additional services, while gaining extra insights and access to your customers.
  
  
• Full catalogue – Car manufacturers: People have been buying cars from dealerships for decades, where you would expect to be able to talk to an expert, test-drive the car and manage services such as repairs. With the advent of online branding and e-commerce, most buyers shopping for a new car will check out the brand’s website first. For instance, if you want to buy a BMW, you’ll go straight to bwm.com to see all the latest models, read the specifications, and find reviews. Without a D2C channel, buyers must first do their research online, and then go visit a dealership, resulting in an inconvenient two-step process.
  
  By operating a D2C marketplace with your dealerships as merchants, a customer could seamlessly go from researching which car they want on your website, to purchasing it immediately via your marketplace interface – your dealership would fulfil the order, taking care of the inventory and end-mile delivery, but you gain direct access to your customer.
  
  And with that, a chance to nurture a life-long relationship through your marketing activities. And if you’re at all sceptical about customers buying expensive investment purchases entirely online, just consider Tesla. However, with a marketplace model, your customer would also have the option to choose BOPIS, giving them the flexibility to go test-drive the car at a dealership for added peace of mind.
  
  
• Product testing – Music instrument manufacturers: Any music aficionado will know that the experience of buying the instrument is part of the joy – you want to feel the weight of the piano keys under your fingers, or pick up that electric guitar and test how heavy it is.
  
  With a D2C marketplace utilizing resellers as merchants, customers could buy directly online, while your resellers network solves the logistics side of the sale. This would include BOPIS, product testing and return management, in case the customer isn’t happy with what they ordered.
  
  
• Bulk delivery – Large appliance manufacturers: It’s becoming increasingly popular to buy white goods such as fridges, washing machines and dishwashers online. The issue with D2C for large appliances is the complex and bulky shipping. It doesn’t make financial sense for a manufacturer to ship a single fridge, but it does make sense to ship a large quantity of fridges to the dealers who then take care of the last-mile delivery.
  
  This can be achieved through a marketplace model, meaning that customers could buy a General Electric (GE) Fridge directly from the GE website (where they can access the most up-to-date product information), and the actual shipping and logistics would then be taken care of by a reseller such as Lowe’s or Home Depot, as merchants on the marketplace.
  
  
• Full range – Paint manufacturers: Customers looking to buy paint usually have a very specific product in mind. Whether they need a small quantity of a specific color to decorate a nursery for new arrival, or a large quantity to revamp a huge corporate office space. To accommodate these needs, there are a host of very specialized paint stores where customers can mix the exact color they want and see how it looks in person.
  
  Paint manufacturers, such as PPG or Dunn & Edwards, might see little reason to engage in D2C in this case, since the in-store experience is so vital. However, a marketplace offers customers the opportunity to browse the full range of paint products available, purchase them online, and then mix them instore. The manufacturers can then develop direct relationships with their end customers via branding and marketing, and ultimately increase their lifetime customer value.

Let’s review what we’ve learned in this guide about marketplaces for manufacturers:

• The hares of the commerce world have woken up from their naps and they’re racing ahead. You’ve got to adapt and evolve to beat them.
• The B2B space is seeing a huge increase in digital capabilities, including marketplaces. Businesses who do not have direct access to their customers are playing a losing game.
• The solution is enabling a D2C sales channel. As manufacturers historically rely on relationships with their dealer network, a win-win solution for every party is to set up a manufacturer marketplace with your resellers as merchants.
• Marketplace models have multiple feature options for every different scenario, meaning manufacturers can customize their platform to solve their exact business complexities.
• With the right technology, setting up a marketplace is easier than you might expect. By teaming up with Spryker, you can take advantage of our flexible and composable marketplace capabilities to build the solution you want.